India passenger vehicle sales jump most in a year as dealers boost stocks

NEW DELHI (NewsRise) -- Passenger vehicle sales in India rose the most in nearly a year in July, as dealerships bulked up their stocks after depleting inventories before the introduction of a nationwide tax regime.

Sales rose 15% to 298,997 vehicles in July from 259,720 a year earlier, data from Society of Indian Automobile Manufacturers showed Friday. It was the biggest increase since last September when sales rose 19%.

Deliveries of cars rose 8.5% in the month to 192,773 units while sales of sport-utility vehicles jumped about 35% to 86,874 units, the data showed.

Ahead of the implementation of the new Goods and Services Tax starting July 1, automobile dealers across India had restricted stocks. After the GST came into force, companies cut prices of cars and SUVs to pass on the benefits of lower taxes to customers. At the same time, several companies had offered discounts in June to clear up the stocks at dealerships.

Vishnu Mathur, the director general of SIAM, termed the sales performance in July as an "aberration" because the growth was due to refilling of stocks by dealerships. Car sales in India are counted as factory dispatches, and not retail sales.

However, companies and analysts expect passenger vehicle sales to continue the growth momentum over the next few months as dealers add stocks ahead of this year's festival season that starts in September. Hindus consider it auspicious to buy new consumer durables including cars during festivals.

"With price cuts in most segments, new model traction, and healthy rural recovery on normal monsoons, we expect the passenger vehicle industry to register double-digit growth in fiscal year 2017-18," Vivek Kumar and Shyam Sunder Sriram, analysts at JM Financial Institutional Securities, wrote in a note to clients.

Maruti Suzuki India, the country's largest car maker, sold 153,298 vehicles last month, up 22% on-year. Sales at second-ranked Hyundai Motor India, the local unit of South Korea's largest car maker, grew a marginal 4.4% to 43,007 vehicles.

Local sales of trucks and buses grew 14% in July to 59,000 units in July.

Mathur said sales in the segment are expected to rebound in the second half of this financial year on the back of good monsoons and growth in infrastructure sector. Truck and bus sales fell 3.7% on-year during the April to July period to 210,837 vehicles.

Sales of motorcycles increased 17% in July to nearly 1.05 million units, while scooter sales grew 13% to 569,809 units.

Market leader Hero MotoCorp led with a 21% growth at 543,938 motorcycles, while Honda Motor followed with a 40% surge at 168,075 motorcycles.

Mathur said auto makers will approach the Indian government shortly to discuss the latest decision of the GST council to recommend raising the maximum ceiling of cess on motor vehicles from 15% to 25%. He said the decision, which is yet to come into force, would affect investments by companies in India.

"The lack of clarity on GST is of concern as the cess on luxury cars will affect prices. Moreover, there is no clear definition of luxury," he said.